Developing nations ready to take on bigger role in global financial institutions, say experts

Although candidates from developing nations failed to win the top job at the World Bank, the election process and results have once again reinforced the importance and growing clout of developing nations in the reform and operations of international financial institutions, experts say.

South Korea-born US national Jim Yong Kim was selected as the new president of the World Bank on April 16 to replace Robert Zoellick, who is retiring at the end of June.

Kim, 52, a healthcare expert and president of Dartmouth College in Hanover, New Hampshire, won the job over Nigerian Finance Minister Ngozi Okonjo-Iweala, who had the backing of South Africa and some developing nations.

Kim, a physician and anthropologist, who has been working on diseases such as tuberculosis and the AIDS virus for decades, will take up his new job on July 1 and is the first head of the bank who is not a politician, a banker or a career diplomat.

Though the US candidate won the election, it was the first time that there was a serious challenge for the top slot.

Yukon Huang, a senior associate at the Carnegie Endowment for International Peace, a foreign-policy think tank in Washington, says the elections have shown that there is considerable resentment over the poll process being biased in favor of the US. But the current poll process has been encouraging as "Kim's nomination has very little to do with political factors unlike many of his predecessors".

Though the poll process was not fully transparent, Huang says, it was the first time that there were two serious contenders from developing nations. "This will help build up the case for having someone other than an American to occupy the top slot in future."

From its inception in 1944, the 187-nation World Bank has always been run by an American, while the top job at its sister organization, the International Monetary Fund, has always gone to a European as part of a tacit agreement between the United States and its European allies.

But in recent years, there has been pressure from emerging economies to make the selection process more transparent by including candidates from outside these blocs.

The leading challenger Okonjo-Iweala said in a statement that the process of choosing a World Bank president "will never be the same again", while congratulating Kim.

Former Colombian Finance Minister Jose Antonio Ocampo, who pulled out of the race earlier, says, "the selection process is shifting from a strict merit-based competition, which my credentials more than back up, to a politically-oriented exercise."

Shi Yinhong, professor of international relations at the Beijing-based Renmin University of China, says that while the World Bank is getting more involved and reliant on the emerging economies, the influence of countries like Brazil and China on the bank's operations is still limited.

"As an institution that is focused on solving the problems of developing countries, the bank should seek more involvement of emerging economies in the decision-making process, as these nations have a better understanding and insight of the problems faced by the developing nations," he says.

Zhu Ning, deputy director of Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University, feels that Kim's election is an unusual choice, and it will open more doors for developing nations to push for their candidates.

"The bank should be more open-minded to the economic growth achieved by the emerging economies particularly the BRICS countries (Brazil, Russia, India, China and South Africa) and facilitate meaningful and fruitful discussion between the developed and developing economies to rebalance the out-of-balance global economic and financial system," he says.

On April 17, UN Secretary-General Ban Ki-moon, a South Korean, and Kim discussed the challenges ahead for the bank, including efforts to achieve the Millennium Development Goals and to promote sustainable development.

Kim told the Wall Street Journal after his selection that his top priority would be to lay a foundation for job creation, as the bank faces pressing challenges in its transition from providing loans and grants to that of solving problems of broader economic concerns.

"In every single country I've been to, they are really hoping private-sector growth can happen quickly so that jobs can be created," Kim told Wall Street Journal in an interview from Lima, Peru.

The bank's role involves finding solutions to a host of economic issues around the world, ranging from climate change to fighting poverty and promoting development in poor countries. In recent decades, it has focused on poor nations in Africa, Asia and Latin America, by providing development loans for financing to build dams, roads and other infrastructure projects.

Martin Edwards, associate professor at John C. Whitehead School of Diplomacy and International Relations at Seton Hall University in New Jersey, believes that Kim may face some "real obstacles in reforming the bank to cope with current challenges".

"There's been a growing concern that the bank has been trying to do too much on the ground in many countries, with the consequence that many of its programs may operate at cross-purposes with each other. So the real challenge is to keep the bank relevant without overpromising and underdelivering," says Edwards.

He says emerging nations such as China will continue to play an important role in the bank.

"It's no accident that Kim's listening tour included trips to many emerging market countries (including China). These are key constituencies for the bank for financial support, and their role will only grow going forward," says Edwards.

Kim's selection has also raised some concerns as many were not sure whether his expertise in global health issues (rather than in economics), would stand him in good stead to tackle the complex financial issues.

However, Edwards says that is the real genius of the selection.

"Global health issues are development issues, as outlined in the Millennium Development Goals. It's true he's not an economist, but there's plenty of that expertise available in-house. Kim will surround himself with very bright people to move forward," he says.

Carla Freeman, associate research professor at the Paul H. Nitze School of Advanced International Studies with Johns Hopkins University, says that in some respects, Kim's selection reflects the tradition of selecting candidates preferred by the US and Europe. But it also appears that his nomination had the backing of key Asian economies.

"Kim's Asian heritage does put an 'Asian face' in the bank. But his roots in Korea are less important than his potential to envision a new role for the bank at a time when there is growing consensus that it needs to redesign its mission," she says.

Contact the writers through lvchang@chinadaily.com.cn

Chen Jia contributed to this story.

(China Daily 04/20/2012 page3)